The pandemic’s lasting impact on the supply chain

At first glance, it might look like the pandemic-era supply chain chaos is nearly over.

Headlines bemoaning shortages of everything from PlayStations and Care Bears to medical devices are no longer a daily occurrence. Just six vessels were waiting to dock at the ports of Los Angeles and Long Beach on Tuesday — a tiny fraction of the 109 that were stuck outside the San Pedro Bay back in January. Meanwhile, the cost of sending a 40-foot shipping container from Asia to the West Coast is now under $3,000, far below last year’s high of more than $20,000.

In a single day, we interact with hundreds of computer chips, most no larger than a penny. These tiny circuits power everything from smartphones and laptops to medical devices and electric vehicles, and they’re largely responsible for our increasingly computerized lives. But in recent months, the world’s dependence on these chips has also put them at the center of mounting tensions between the United States and mainland China over Taiwan.

Taiwan is located just 100 miles from China’s eastern coast, and it produces the vast majority of the advanced chips used in today’s electronics. The island is a democracy with its own government, and is home to more than 20 million people. Officials in Beijing, however, claim Taiwan as part of China and have repeatedly threatened to invade and “reunify” the island with the mainland. The US does not officially recognize Taiwan’s independence, though President Joe Biden has suggested that he would send American troops to defend the island against an invasion. As a result, there’s fear that a blockade around Taiwan could create a humanitarian and trade crisis, ultimately cutting off the world’s access to tons of critical technology.

Neon, a colorless and odorless gas, is typically not as exciting as it sounds, but this unassuming element happens to play a critical role in making the tech we use every day. For years, this neon has also mostly come from Ukraine, where just two companies purify enough to produce devices for much of the world, usually with little issue. At least, they did until Russia invaded.

Faced with the devastating reality of war, Ukraine’s neon industry halted production. One of Ukraine’s two primary neon companies, Ingas, is based in Mariupol, which has been repeatedly bombed by Russian forces and is currently under siege. The other company, Cryoin, is based in Odesa, where citizens are currently preparing for an assault. And amid terrifying conditions and a mounting number of civilian casualties, the safety of the people who work at these firms is the priority, not the potential impact on tech manufacturers.

The thing Mickey Weaver hears most from prospective truck drivers is that they want to be home every night. The second thing they want is money, but, he says, it’s funny — a lot of people are willing to sacrifice the money to be home daily. But that’s also a big ask. “I can get you money, any way you want it,” Weaver said. “If money’s all you care about and you don’t care where you’re driving or when you’re going out, I got 40 ways from Sunday to hook you up on that.”

Weaver, who’s based in Arkansas, runs We Hire Truckers and Truck Jobs 4 U, which, if you couldn’t guess from the names, recruit truck drivers to open positions. He started this work a little before the pandemic; in March 2020, hiring slowed down a bit, but last fall it began to skyrocket again. Now, there is no shortage of open jobs. “I’ve got more jobs than I’ve got drivers,” he said.

A surge in cases driven by the highly transmissible omicron variant has stretched America’s Covid-19 testing capabilities to their limit. Rapid antigen tests are out of stock at many drug stores, and lines for PCR tests stretch around the block in cities across the United States. The problem will likely get worse as more people travel for the holidays and fuel new outbreaks, long before new supplies of tests from the federal government are scheduled to arrive.

Covid-19 is spreading so quickly that the US may need between 3 million and 5 million tests every day by early February, which is far more than the country currently conducts, according to internal modeling from the Health and Human Services Department. With test supplies dwindling, some local officials are urging the Biden administration to invoke the Defense Production Act, a Korean War-era law that allows the president to order private companies to manufacture certain products during emergencies. To help combat the shortage, the White House said early on Tuesday that it will ship up to 500 million free tests directly to US homes, beginning within the next few weeks.

Behold the simple shipping container. It’s a large, steel box that can carry tens of thousands of pounds of cargo. It’s also stackable and designed to fit on ocean freight ships, trains, and even trucks. These containers have been an unnoticed cog in the world’s highly complex manufacturing network for decades. But not anymore.

Thanks to the pandemic, the shipping container is now at the center of the global supply chain crisis, which has interrupted the delivery of everything from medical supplies to holiday gifts. Because of widespread manufacturing delays and bottlenecks, there aren’t enough of these boxes in the right place and at the right time. There are also too many containers at shipping terminals, which is clogging up ports and blocking more cargo from arriving. Exporters, meanwhile, are struggling to find the empty containers they would normally use to send their products to customers abroad. These shipping container problems are continuing to pile up as the larger manufacturing system they helped enable also struggles to adapt.

In the United States, it’s the gas and Thanksgiving dinner and holiday toys. In the United Kingdom, it’s the energy costs and snacks and Uber fares. In Brazil, it’s the cost of food. In Germany, it’s fuel, rent, and electronics.

Consumers around the world are seeing higher prices for goods and services, and though some reasons for this vary by country, inflation is turning into something of a worldwide phenomenon.

The supply chain comes for everyone, including Adele. Or maybe it’s Adele who’s coming for the supply chain — specifically, the vinyl supply chain.

The British songstress released her latest album, 30, on Friday to much global fanfare, and she’s expected to do major worldwide sales (at a moment when physical music sales are rare). There’s been speculation that Adele’s big splash may also have implications for the music business, and not necessarily all good ones. Sony Music reportedly ordered some 500,000 copies of vinyl records for the album’s release, potentially putting a squeeze on an already tight supply chain. With Adele pressing all those records, there has been speculation that she’s crowding out some space for others. At the very least, the issue is drawing some attention to a real crunch in the music industry.

Black Friday, the Friday after the Thanksgiving holiday, once marked the start of the holiday shopping season. In recent years, though, the event has begun to feel like something of a bygone tradition. The holiday retail calendar begins a little earlier every year, but 2021 was especially notable: Some retailers started dishing out early-bird sales and reminder emails as early as September. Shoppers were encouraged to order their gifts as soon as possible or risk having packages arrive late, due to rampant supply chain disruptions and mailing delays. Even books (yes, books!) weren’t safe from the impending shortages.

The pandemic briefly curbed consumer spending, but not for very long: As the country opened back up, Americans felt the urge to get out and shop, an impulse that retailers and marketers happily indulged. The early fall holiday shopping schedule was billed to benefit customers by reducing their annual holiday stress, which is likely compounded by supply chain delays. Yet retailers are still banking on shoppers turning out on Black Friday, despite launching monthslong campaigns urging them to shop early.

Holiday shopping is going to be annoying this year. Many things are more expensive, and in-demand items are hard to find. It’s a real “All I want for Christmas is to stop hearing about supply chains and inflation for half a second” moment.

While it’s a weird time in the economy, that weirdness isn’t necessarily translating to people holding back on buying. People are shopping a little differently this holiday season, but they’re not not shopping. Nearly two years into a pandemic, the American consumer will not be deterred, at least not entirely.

Manufacturers haven’t overcome the worldwide semiconductor shortage. Gaming consoles like the PlayStation 5 are still scarce, automakers are delivering cars with missing features, and Apple may end up producing 10 million fewer iPhones in 2021. For a few companies, however, these supply chain woes may have an unexpected upside.

The manufacturing delays abroad and relentless demand for consumer electronics have turned into a windfall for some chipmakers in the United States. Even lesser-known American manufacturers with aging or secondhand equipment have seen a surge in sales for the legacy chips, or microcontrollers, they produce. These parts are inexpensive to make but are a critical component for many devices, and as supply chain troubles have affected larger companies that focus on more advanced technologies, demand for the more basic chips has grown. Flush with customers, the companies that make these microcontrollers are now on a spending spree to boost their overall manufacturing capacity.

John Peterson, a third-generation turkey farmer, has had customers come to his Ferndale Market in Minnesota lately asking whether they’re going to run out of turkeys heading into Thanksgiving. Everything feels scarce right now, and people assume turkeys will be, too, even though from where Peterson’s sitting, that’s not really the case. “We don’t have any reason that we should run out of turkeys,” he says. “We’re growing the same number of turkeys that we did a year ago.” That translates, for his farm, to 150,000 turkeys annually.

Still, the concerned customers are on to something. There isn’t a mass turkey shortage, but the birds may not be as easy to get at the grocery store right now as they have been in years past. Or at least, not the turkeys meat eaters want.

As of Friday morning, approximately 70 ships filled with cargo were anchored outside the ports of Los Angeles and Long Beach, which are the points of entry for more than 40 percent of US imports. This backlog is a clear reminder that there aren’t enough workers or facilities to take in all the products that are being shipped to the United States right now. But even as supply chain problems continue to pile up, experts say progress is possible.

The pandemic has exposed the fragility of the US logistics industry. Manufacturing bottlenecks and shipping delays have resulted in cargo piling up not only in port terminals but also in rail yards and warehouses. Critical equipment, like shipping containers and truck chassis, is unavailable, causing distribution centers to develop deep backlogs. Meanwhile, a surge in demand has strained the system even further.

Federal Reserve chair Jerome Powell said on Friday that Americans should be prepared for the global supply chain to remain in crisis through 2022 — and that the central bank is preparing to deal with the attendant challenges for the US economy.

Speaking at a Bank for International Settlements-South African Reserve Bank centenary conference, Powell warned that “supply-side constraints have gotten worse” over the course of the pandemic, while the supply chain and economic risks are “clearly now to longer and more-persistent bottlenecks, and thus to higher inflation.”

President Biden announced this week that the Port of Los Angeles would operate 24/7 in a bid to address product shortages in the United States. The news arrived in tandem with the Labor Department’s release of data showing that the ongoing supply chain crisis is driving up consumer prices and inflation.

Conservatives are spinning these developments into a tale about how this supply chain catastrophe is ruining Christmas — and it’s all Biden’s fault.

Best Buy has revealed a curious way to cash in on worldwide shortages and shipping delays: subscriptions. This week, the company announced a $200-a-year program that promises consumers lower prices and exclusive access to hard-to-find devices. While the new membership also includes 24/7 tech support and free shipping, the idea of guaranteed product availability might be particularly appealing to shoppers worried that their orders won’t arrive in time for the holidays.

The new Best Buy service is a stark reminder that retailers don’t anticipate that supply chain issues, including the global semiconductor chip shortage, are going away anytime soon. In fact, it looks like they’re getting worse. A supply crunch for petrochemicals, which are used in everything from paint to plastics, has raised the prices on all kinds of products. Meanwhile, an emerging energy crunch in China has led to power cuts that have closed factories and disrupted daily life there. These recent developments are compounding the existing problems with the global supply chain and making logistical bottlenecks worse. Combine that with an ongoing shortage of shipping containers and truck drivers, and the end result is a huge slowdown in the delivery of goods.

If there’s a particular book you’ve got your eye on for the holidays, it’s best to order it now. The problems with the supply chain are coming for books, too.

“Think of the inputs that go into a book,” says Matt Baehr, executive director of the Book Manufacturers’ Institute. “There’s paper, there’s ink, and there’s getting the book from point A to point B. All of those things are affected.”

The global supply chain is in hot water. The pandemic has made it notoriously difficult for shoppers to buy certain consumer goods, from home appliances and furniture to laptops and bicycles. And things aren’t getting better anytime soon, at least not this year. Shipments have been delayed, raw materials are in short supply, and businesses have scrambled to dole out apologies and assurances to anxious customers.

With the holidays a few months away, experts are predicting that the year’s busiest shopping season will be “a perfect storm” of supply chain bottlenecks. Shoppers, as a result, will face higher prices, even as retailers remain uncertain as to whether they can keep up with demand.

Starting next week, General Motors is again halting the assembly lines of several pickup truck plants because the company doesn’t have enough computer chips. The plants had been back up and running for just a week following a shutdown in July, which was also caused by the chip shortage.

These production halts may not stop anytime soon. “I do think we’ll continue to see impact this year, and it will have a tail into next year,” warned CEO Mary Barra on Wednesday. And Intel CEO Pat Gelsinger similarly predicted last month that things won’t get back to normal for at least a year or two.

Even a year after the pandemic started wreaking havoc on global supply chains, a chip shortage is still disrupting entire industries.

This year, some of GM’s newest cars won’t have a critical feature — an advanced fuel management system that saves gas — because the company couldn’t get enough chips, the transistor-filled semiconductors that keep so many of the devices we use today running. After announcing in March that customers who buy the new Chevrolet Silverado and GMC Sierra pickups between now and the end of the summer will have a lower fuel economy, GM said Thursday that worsening supply chain issues have led to temporary closures of eight of its assembly plants, affecting about 10,000 workers.

Last week, I realized my decade-old Mongoose bike was falling apart. Its brakes honked like an aggrieved bird, and the back frame had bent enough that a repair shop called it a significant safety issue. So, anticipating several months of traveling by bike, I started to call my local shops to see what was available.

It didn’t take long for me to realize I was not alone in seeking out a new mode of transportation for the pandemic. When I finally found a store that had a bike in my price range and size, there was just one left, and it was still being assembled. The bike shop owners told me they’d never seen sales like this and were struggling to get more supply.

For health care workers, the N95 mask is an invaluable line of defense against the novel coronavirus. These highly protective respirators can keep doctors and nurses from getting infected by patients, but the world is quickly running out of them. While countries around the world scramble to find stockpiles of N95s and manufacture more of the much-coveted masks, it’s unclear how this shortage will resolve itself.

The situation in the United States is increasingly dire. On April 2, President Trump invoked the Defense Production Act (DPA) to compel 3M, one of the only companies that manufacturers N95 masks in the US, to ramp up production. Many, including Democratic presidential primary candidates Joe Biden and Bernie Sanders, had pushed the White House to use the DPA more aggressively to deal with medical supplies shortages. The president later said in a tweet that 3M “will have a big price to pay” for exporting masks.